Loading ...The CRB index is giving us some decent signals now. Many of the indicators are diverging from recent price action. I’ve picked the MACD to highlight here. If the signals are correct, we’re going to see inflation rather than deflation when it comes to commodities (not too surprising when you consider just how ‘cheap’ everything is at the moment. Hope you like the chart.
Here’s a big picture view. Please forgive the terrible chart (I couldn’t get a very long term view on my usual platforms). I think you get the idea though. The support has held since the low back in 2000. Inflation or deflation ? Something this way commeth…
Not sure how widely that saying is used, but it just means certain horses are suited to certain courses. In other words, some things are better in certain situations than others.
How you draw a technical chart is entirely up to you. It depends what it is you are trying to find out/demonstrate. The idea of thick lines or thin lines comes down to using them in the right context. You might’ve noticed I’m somewhat ‘vague’ about the breakout level for gold. I prefer to talk about a ‘zone’. That’s the ultimate thick line. It’s justified though, because there are several ways to draw the chart (the ‘bowl’ can have a flat top, or it can be inclined at an angle. You can put it on a log or linear scale etc). I’ve used the term ‘turbulence zone’ a few times to try and express precisely this point. Below are two charts – one with thick lines, and one with thin ones to demonstrate my point.
Nothing has changed, and nothing will change until we break through the $1350-$1400 region, or $1210-$1220 support fails.
The bowl/wedge patterns will soon let us know if they are indeed valid. If not, expect a rapid collapse, with miners falling to new record lows and silver trading in the $5 to $10 range.
Just the chart
Ho Hum…
Indicators supportive of a turn soon though. Perhaps we need to bounce off the support line around 145.
I’m going to lay myself open to accusations of changing the chart to suit my bullish bias, but I don’t mind. I think it’s perfectly ok to go back to the drawing board and reconsider things like line placement. We’ll soon know if my bullish bias is correct, because we’re closing in on the bowl support area. Here’s the bullish wedge with adjusted line placement…
The reason I’ve done this is that I do still think this is a bullish descending wedge chart pattern. Putting it into the bigger picture, this is how the chart now looks…
is to get rid of COMEX…
Predictable hammering during COMEX trading hours, day after day. Whack-a-mole.
One possible interpretation
Fibonacci levels from the 2008 low to the 2012 top. Hit after hit. Mathematics is amazing sometimes.
… For gold in Australian Dollars
The bullish descending wedge has broken out, and is currently undergoing a hard backtest. As long as we close the week above the line I think we can safely say a new cycle has begun and we have another shot at the magic $1360-$1400 region
I’ve been saying to anyone who will listen, for quite some time – in my view the UK will not leave the EU. The UK Government issued this to the people…
Following the vote to leave, the deadline was set as May 29th 2019. Still the UK hasn’t left. The deadline has been pushed back to October, but it needs to be decided long before then. The Government goes on Summer break Mid July to September. No deal has already been ruled out, so that just leaves no Brexit. That can happen by simply revoking Article 50, but much more likely is some sort of deal is cobbled together, then it goes to the people for another vote. I think there will be enough people who have changed their minds, to make it closer to 60/40 in favour of remaining in the EU. Brexit will be dead in the water.
The Brexit party is likely to be the single biggest party after that, with representatives in the European Parliament stirring up trouble, despite an electorate who eventually voted remain. Total mess is an understatement.
One upshot, is a stronger Euro, dropping the Dollar Index and providing a tailwind for PMs. The charts have been telling us this is likely to happen, and this might just be another fundamental reason why.
I’ve posted this several times, and I’ve been posting the ’rounded base’ since last Summer. The latest bullish descending wedge has broken to the upside. Great news, but nothing changes until the $1360-$1400 region is broken to the upside, or $1220 region is broken to the downside. I believe the risk/reward is very heavily tilted in favour of an upside breakout.
Generally it’s a good thing if commodity indices are at a low point if you are predicting a major new bull run in gold is about to get underway. At the start of the last big run in 2001, we saw a 30% sell off in commodity indices like the BCOM. During the same 12 month period gold slowly trended upwards. The commodity index hit its low and boom, gold was back in the room.
Makes you think, doesn’t it ?
First, the chart…
I’ve shaded gold bull runs in green and bear drops in red.
Some key points here:
1 – We are at a level that has frequently marked a turning point. In fact we just broke through that level
2 – Indicators like TSI are also at a level that might suggest a turning point is near (it can remain high for longer though)
3 – Most intriguing to me – look back at 2002 and 2003 – the ratio continued to rise even when gold rose 30%
So what was going on ? It’s interesting because this time around gold has risen from $1050 to roughly $1300 with the ratio rising. This is a repeat of the early 2000’s. If we can understand what was happening in the charts back then, it should offer clues about the most likely move that will come next. If there are striking similarities, it would mean the relative price behaviour of the two metals is merely doing exactly what it did nearly 20 years ago. It would add yet more confidence to my bullish thesis. After all, we all know what happened in the years that followed the early 2000’s. Lets have a look at the 2 charts then – the early 2000’s and now…
So there you have it. History doesn’t necessarily repeat, but it sure has some very valuable clues that we can learn from.
They can be very, very useful, BUT it’s really important to consider them on all time frames. I think we have a good example at the moment. Lets take a look at Williams %R (which is a momentum indicator). Looking on a short time frame it looks like this…
Looks to be getting high, so it may turn down at any time, suggesting there may not be enough momentum to carry price through resistance. However, if you look back at late 2018, you can see it remained high for weeks as gold rallied another $100. In order to help decide whether this is likely, it’s useful to zoom out and consider the indicator on a longer timeframe. Here it is on the 5 year view…
Conclusion – we’re just getting started. Downside looks limited (still $1220-$1240), whilst upside is considerable. Personally, I doubt we drop much further from here, but It’s worth bearing in mind until we close the week above the wedge.
EDIT – I should add that I selected the 5 year view and zoomed in a bit, to show the last 3 years or so.
And anyone else who wants to know how I use cycle theory. I’ll be honest – I find cycles on the timescales of days and weeks very hard to analyse. I’ve tried, but I can often only make sense of it with hindsight. All the A-B-C’s and 1-2-3’s seem very hard to predict ahead of time. Even amongst Elliot Wave followers there are often differences of opinion. It doesn’t really matter to me though, because my game plan doesn’t rely on any of that. All I want to know, is which way the big trading patterns will break. The 8 and 16 year cycle lows coincided during late 2000/early 2001. The 8 year cycle bottomed in 2008 and then they both coincided and bottomed again 2016. The next 8 year cycle low is in 2024, and then they coincide again in 2032.
So, knowing all that, we are pre-warned about which way the ‘trend’ is likely to be over periods of several years at a time. I wouldn’t go so far as to say it’s 100% guaranteed (just because predicting the future never comes with 100% certainty – as a weather forecaster, I’ve learned that over the years). That said, you can use the balance of probabilities to make an informed decision about what the future is most likely to look like. In this case, we are most likely to see PM’s trend upwards until we turn down to make that 2024 low. When will it turn down ? that depends on whether we have a left or right translated cycle. This is why I read everything the cycles experts like Surf, Rambus etc write, and place that alongside the chart patterns I’m following. I’ll sell all my PM shares at this downturn. When we turn up again after 2024, I intend to be all in again, and sell as we make that big turn and head down into the low in 2032. If it works out, you’ll be able to find me on a tropical beach with a nice cold beer in my hand after that. The chart below helps explain how I view things on these timescales…
…very soon, this is going to launch. The first sign will be an upside breakout from this bullish descending wedge. We currently need to pass through $1290 for that to happen. That is the time to go long. Do we break through the horizontal $1360-$1400 resistance zone on this move ? It’s hard to say, but my feeling is yes, with about 60% confidence (so 40% likely we hit resistance and progress closer to the edge of the bowl).
Really interesting decision point ahead. The first is a log chart. The next two linear.
Looking vulnerable here. Credit to Chris Kimble on Twitter. The first chart is my version of one he has posted. The second chart is all me 🙂
Using the recent high as the ‘1’ Fib Level and the 2009 low as ‘zero’, gives numerous hits at all the resulting Fib retracement levels. Interestingly one set of support and resistance lines reaches an apex at the 0.786 Fib level early next year. Worth keeping an eye on. Markets have been relentless in their move upwards, so a blast upwards, negating all of this wouldn’t shock me too much. If I were in the market, I’d be very cautious here though. A much bigger drop of 50% or so is not entirely impossible.
